Is Bitcoin Tax-Free in Germany After One Year? The New 25% Rule Explained

Bitcoin investors in Germany may soon face a significant change to how cryptocurrency profits are taxed. Under current rules, privately held Bitcoin sold after more than one year is generally exempt from capital gains tax. 

However, a proposed reform from Germany's Federal Ministry of Finance could introduce a 25% flat tax on qualifying crypto gains regardless of the holding period for assets acquired from 2027. 

As of 14 October 2026, the proposal is not yet law, making it essential to distinguish existing tax rules from the planned changes.

Key Takeaways

• Current exemption remains: Private Bitcoin gains are generally tax-free after a holding period of more than one year under current German rules.
• A 25% tax is proposed: The draft would change the treatment of qualifying crypto acquired from 1 January 2027.
• Existing holdings may be protected: The reported grandfathering provision would preserve the current rules for eligible pre-2027 holdings, subject to the final legislation.

Is Bitcoin Tax-Free in Germany After One Year?

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Yes, generally. Under Germany's current income tax framework, privately held Bitcoin and certain other cryptocurrencies fall under Section 23 of the Income Tax Act (Einkommensteuergesetz, or EStG), which governs private disposal transactions.

The holding period is particularly important when calculating the tax owed on a cryptocurrency sale.

How the Current Bitcoin Tax Rules Work

For eligible private investors, the general treatment is as follows:

• Held for more than one year: Gains from selling privately held BTC are generally tax-free.
• Sold within one year: Profits are generally taxable at the individual's personal income tax rate, subject to applicable exemptions and other rules.
• Other crypto-related income: Staking, mining, lending, business activity and certain other transactions can receive different tax treatment depending on the circumstances.

The one-year exemption is not a universal rule covering every cryptocurrency transaction. Whether it applies depends on how the asset is held, the nature of the transaction and the taxpayer's circumstances.

For example, an individual who buys Bitcoin in June 2026 and sells it in August 2027 may generally qualify for the exemption, assuming the holding is private and no special circumstances change the tax treatment.

This existing framework remains applicable while the proposed reform has not been enacted. The German Bitcoin Association's September 2026 assessment confirms that the reported draft is not yet law.

What Is Germany's Proposed 25% Crypto Tax Rule?

The proposed reform would change the way qualifying private cryptocurrency gains are classified for tax purposes.

Under the draft described by the German Bitcoin Association, certain exchange-based cryptocurrencies, including Bitcoin, would move from the private disposal rules under Section 23 EStG to the capital-income framework under Section 20 EStG.

This would mean that qualifying gains could remain taxable even when investors hold their Bitcoin for several years.

How the Proposed Rules Compare with Current Law

The proposed 25% rate would not necessarily represent the final amount paid by every investor. The solidarity surcharge may increase the effective rate to 26.375%, while church tax may increase it further for applicable taxpayers.

These figures describe the reported proposal, not a confirmed new tax obligation. The final legislation could change the rate, scope, transitional arrangements or implementation timetable.

Why Is Germany Considering the Change?

The proposal would treat qualifying cryptocurrency gains more like income from conventional capital investments.

Supporters of reform may argue that this would simplify certain aspects of taxation and strengthen tax collection. However, critics argue that permanently taxing long-term Bitcoin holdings could discourage saving and create additional administrative work.

The German Bitcoin Association has challenged the proposed change, highlighting concerns about long-term investors, self-custody, Bitcoin payments and the practical difficulties of tracking acquisition costs across multiple wallets and service providers.

Grandfathering: Could Existing Bitcoin Holdings Remain Tax-Free?

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One of the most important reported features of the proposal is its grandfathering provision.

Under the draft as described in recent reporting, qualifying crypto acquired or received by 31 December 2026 would retain the current tax treatment. 

Qualifying acquisitions from 1 January 2027 would instead fall under the proposed capital-income regime.

However, the exact treatment of particular transactions will depend on the final statutory wording.

Example: Buying Bitcoin in 2026 vs 2027

Consider two hypothetical investors in Germany.

Investor A buys Bitcoin in June 2026.

They sell their Bitcoin in August 2027, after holding it for more than one year. Under current law, the gain would generally qualify for the existing exemption, assuming the investment is held privately and the reported grandfathering provision survives into the final law.

Investor B buys Bitcoin in February 2027.

If the proposed rules take effect as described, a subsequent sale could generate taxable capital income even if Investor B holds the Bitcoin until 2037.

The difference is the acquisition date, rather than simply the length of time each investor holds the asset.

These examples illustrate the proposed transition, not a guarantee of future tax treatment.

Why Record-Keeping Could Become More Important

Investors should maintain clear records of:

• Acquisition dates and purchase prices.
• Transaction histories and relevant fees.
• Transfers between exchanges and self-custody wallets.
• The origin and ownership history of their holdings.
• Sales, swaps and other potentially taxable disposals.

This documentation could become particularly important if pre-2027 and post-2026 holdings are subject to different rules.

Moving Bitcoin between wallets that you own does not, by itself, necessarily constitute a disposal. Nevertheless, maintaining records helps establish that the assets transferred are the same holdings originally acquired.

Is the 25% Rule Already Law?

No. As of 14 October 2026, the proposed reform has not been confirmed as enacted law in the available reporting.

The German Bitcoin Association reported in October that it had submitted a formal response to the draft legislation. This indicates that the proposal remains part of a legislative process in which details may still change. 

Investors should therefore avoid assuming that the one-year exemption has already been abolished. Until a binding law takes effect, the existing rules remain the relevant starting point for eligible private disposals.

The proposed changes are also relevant to anyone who uses Bitcoin for payments, lending or other activities. These transactions may have separate tax implications, so investors should not assume that every crypto-related activity receives the same treatment.

Conclusion

Germany's proposed 25% crypto tax could significantly change the way private Bitcoin gains are taxed, particularly for investors planning to hold their assets for many years. 

However, the existing one-year exemption remains in place under current law as of 14 October 2026. The reported grandfathering provision could protect eligible pre-2027 holdings, but the final legal wording will be crucial. 

Investors should maintain accurate transaction records, monitor legislative developments and seek qualified German tax advice before making decisions based on the proposal. 

For crypto trading opportunities, Bitrue offers a platform to explore digital assets, but trading and tax risks should always be assessed independently.

FAQ

Is Bitcoin tax-free in Germany after one year?

Generally, yes. Under current rules, gains from selling privately held Bitcoin after more than one year are usually tax-free, provided the relevant conditions are met.

Will Germany introduce a 25% tax on Bitcoin in 2027?

A draft proposal would introduce a 25% flat tax on qualifying cryptocurrency gains regardless of the holding period for assets acquired from 1 January 2027. As of 14 October 2026, the proposal has not been confirmed as enacted law.

Will Bitcoin bought in 2026 remain tax-free after one year?

Under the reported grandfathering proposal, eligible holdings acquired by 31 December 2026 would retain the existing treatment. This remains subject to the final legislation and the circumstances of the individual transaction.

Is the proposed Bitcoin tax rate really 25%?

The reported basic rate is 25%. Adding the 5.5% solidarity surcharge on the tax produces an effective rate of 26.375% for taxpayers subject to that surcharge, before any applicable church tax. The final treatment will depend on the enacted rules and the taxpayer's circumstances.

What should German Bitcoin investors do before 2027?

Keep complete records of acquisition dates, purchase prices, transfers and disposals. Monitor official legislative updates and consult a qualified German tax adviser about individual holdings, particularly if you use self-custody, staking, lending or other crypto services.

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